Public Bill Committee

[Sir Nicholas Winterton in the Chair]

Clause 68

Stakeholder pension schemes

Andrew Selous: I beg to move amendment No. 158, in clause 68, page 32, line 4, at end insert—
‘(1A) In section 1 (meaning of “stakeholder pension scheme”), omit subsections (7) and (8).’.
Let me welcome you back to the Chair, Sir Nicholas. We also welcome my hon. Friend the Member for Rochford and Southend, East to the Committee. I would like to put on record all Members’ sympathy for the Minister for Pensions Reform, who is not with us due to a family bereavement.
Clause 68 brings in necessary reforms to stakeholder pension schemes, principally to remove the statutory duty on employers to have a designated stakeholder pension scheme in the light of the introduction of personal accounts though the Bill. We support what clause 68 seeks to do because the pensions landscape will have moved on and stakeholder pension schemes will not be necessary in the way that they once were.
Genuine and understandable concerns have been expressed, however, about what will happen to existing stakeholder schemes, particularly in 2017. In the early evidence sessions of the Committee, Tim Jones and the Minister for Pensions Reform both said they were keen to look at whether the personal accounts trustee corporation would be able to allow transfers out of personal accounts, probably in around 2017. We understand the reason for that. One very good reason is that there could be hundreds of thousands of very small personal account pots, perhaps belonging to foreign workers who have been in this country for a matter of months and have returned to their home country and are never going to come back. The personal accounts trustee corporation will be forced to maintain those small accounts for all time if there is not the option to transfer out.
The concern is that these transfers-out may end up being pushed on to the existing stakeholder pension schemes because current legislation, which is not being rescinded, prevents the winding down of these stakeholder pension schemes, even if the stakeholder provider might not want to keep them going. Clause 68 would force stakeholder pension schemes to accept transfers-in of possibly large numbers of very small amounts. There is concern that this may lead to an increase in the charges stakeholder pension schemes.
Such charges were initially brought in and capped at 1.5 per cent. for an initial 10-year period. I am sure the Minister will tell us this when he responds, but my understanding is that 2017, when we are looking at the potential for transferring out, will be beyond that 10-year period in most cases. Therefore, the stakeholder schemes will have the option—and indeed they might be forced—to increase charges to cope with the administration of perhaps a very large number of small pension accounts being forcibly transferred in.
This could have serious consequences for the existing members of those stakeholder pension schemes, who might find their returns to be less than expected because of higher levels of charges being imposed on them because of these transfers-in, which clause 68 currently allows.

Julie Kirkbride: My hon. Friend is clearly very knowledgeable about these matters. Will he help the Committee by explaining what he thinks is the rationale behind requiring this move out of personal accounts and into stakeholders? Why stakeholders; why not some other vehicle? What is the rationale for doing it this way, because I completely take on board his concerns about the downside of this particular move?

Andrew Selous: I thank my hon. Friend for that intervention. My understanding is that personal account holders will not be forced to transfer into stakeholder schemes specifically, but the point is rather that these stakeholder schemes will be unable to refuse to accept these many small pension pots. Account holders can choose to take their personal accounts elsewhere, so they will have that choice.
What I am arguing for, in amendment No. 158, is giving stakeholder schemes the freedom to operate that any other pension provider would ordinarily have. Clause 68 really seems to be dumping obligations on stakeholder providers quite unfairly, and in a way that could be prejudicial to the existing members of those stakeholder schemes.
Amendment No. 158 would remove the obligation on stakeholder providers to accept transfer values and give them the discretionary freedom to determine whether or not it would be viable to accept certain low-value funds. They might very well decide that they are quite happy to accept these personal account transfers—they could be very keen to receive them—but, given that stakeholder pensions were legislated for and brought into being by this Government, we are concerned that the providers of these schemes should be treated fairly going forward. I know that we are talking about events that are some way off, but it is important to raise this issue now, and I look forward to hearing what the Minister will say about these issues.

James Plaskitt: Good morning to you, Sir Nicholas. It is a pleasure to be serving under your chairmanship again. May I express my thanks to the hon. Member for South-West Bedfordshire and my sympathy for the Minister for Pensions Reform, who is obviously unable to be with us today for sad reasons? May I also welcome the hon. Member for Rochford and Southend, East? It is nice to know that our Committee’s deliberations are attracting new members because of the reputation that our proceedings are earning.
I turn now to the amendment that the hon. Member for South-West Bedfordshire has moved. I understand why he is raising the issue, but I think that there is a danger that he is over-anticipating—and potentially inflating—the problem that he sees. I will explain why a moment. I fear also that, by seeking to head off the problem that he anticipates, he is possibly inadvertently suggesting something that would be harmful to the existing rules for stakeholder pensions. By potentially inflating the scale of the problem, he could be causing a problem somewhere else. Let me go into that in more detail and try to explain why I have that view and why I hope that he will not press the amendment to a Division.
As the hon. Gentleman said, the amendment would remove two important conditions that define a stakeholder scheme: flexibility and portability. It would mean that stakeholder pension scheme members would no longer be able to pay money into their pension when it suited them, subject to the £20 minimum contribution limit provided for in existing regulations. That possibility is important because it enables people who have irregular or intermittent employment patterns to save when they are able to do so. The amendment would also remove people’s entitlement to transfer other pension rights into their stakeholder scheme, thus consolidating small pension savings that they might have elsewhere.
Both the flexibility to make payments and the ability to transfer pension funds would instead fall to the discretion of the pension provider, who could therefore make substantial changes to the current position. That would affect all those people who had bought the products on the understanding that their stakeholder pensions would continue to provide a flexible and portable pension vehicle. That would be a significant number of people, given that 3.9 million stakeholder contracts have been taken out since April 2001 and there are just under 2 million active members. The potential knock-on effect to existing holders of stakeholder pensions would therefore not be insignificant.

Andrew Selous: The case that I was making was slightly different to the one that the Minister is rebutting. I am purely arguing for stakeholder providers to have some flexibility. We know that by law they cannot close the schemes down; I am not seeking to change that. For anyone who wants to stay in a stakeholder and pay money into it, that will be absolutely secure. I am just saying that the providers of the stakeholder schemes, who have done a useful, necessary job and have obligations going forward, should not be forced to accept business that might be uneconomical, and which might have a much better home somewhere else.

James Plaskitt: But the problem is that the hon. Gentleman would do that by removing some of the current conditions of the stakeholder scheme, which could have other consequences. That is why I urge him not to press the amendment to a Division. I also urge that he does not do so for a second reason. In 2017, we will undertake a review of the prohibition on transfers into and out of the personal accounts pension scheme. It is obviously not possible at this stage to anticipate what will come out of that review, but I think that he understands the reasons why it is there.
I understand the concerns that have been raised about the possible knock-on effect on stakeholder pensions should that review recommend lifting the ban on transfers out of personal accounts. Clearly any recommendations that come out of the 2017 review will be carefully considered by the Government at the time, including any potential consequences for other forms of pension provision.
I will expand on the problems that the hon. Gentleman cited. There is the question of whether everyone with small pots will want to make transfers. A lot of people might conclude that they are happy to leave them where they are because they might come back to them to make further contributions in the future. They will therefore not see the necessity of relocating those pots. They might also have other vehicles that are not necessarily stakeholder schemes to which they can relocate the pots. They would be able to consider or make a transfer into a stakeholder pension only if they already had a stakeholder pension.
As the possibilities are widened, the scale of the potential problems that the hon. Gentleman anticipates are reduced. It makes more sense to wait until the 2017 review, when the scale and nature of the issue will be more apparent. That review will take into account, in considering whether to lift the option on transfers out, the potential impact on other funds to which those pots might be transferred.

Andrew Selous: Perhaps if I had let the Minister carry on, he would have answered the point that I was going to make. Can he reassure the Committee that, following the 2017 review, if there were serious negative consequences for existing stakeholder schemes—we all want them to be successful—they would be dealt with by regulation or some other means to ensure that whatever was proposed was not too injurious to the stakeholders?

James Plaskitt: I am not sure what the hon. Gentleman means, but the issue will clearly have to be considered. If there were a serious consideration in 2017 that the restriction on transfers out would be removed, questions would have to be asked about the consequences, not just on the stakeholder schemes, but across the whole pension provision market. It will not be possible to begin to make any sort of judgment about either the scale or the nature of that until we have got to 2017 and those funds have been in place for five years.

Julie Kirkbride: Is the Minister saying that those people could be in the stakeholder scheme already, but that they will be in a company that then takes out a personal account and therefore that they will have two schemes that they might want to consolidate into one? I am trying to work this out. Are existing stakeholders involved, or people who do not have a stakeholder pension and want to buy one, because they want to transfer it to a personal account? I am just a bit confused about who those people are.

James Plaskitt: It is not quite as complicated as the hon. Lady thinks. First, we have to remember the criteria about qualifying schemes. It may well be the case that perhaps all the existing stakeholder schemes will qualify under the Bill as qualifying schemes. There is sometimes misapprehension about whether auto-enrolment applies only to the new brand of personal schemes that the trustee board will bring into existence. A range of schemes could qualify. So I do not think that people will be forced into a couple of schemes, which is what the hon. Lady was suggesting. I hope that she is reassured by that.
I am arguing that it is not desirable to promote the changes that the amendment seeks, because they have other consequences that we do not want. I also think the amendment is driven by over-concern about the scale of the challenge that might be presented. This is all very conditional on what happens in 2017. Mindful of these real issues, the sensible thing to do is to wait for the 2017 review and see what decisions are made at that point in respect of whether the opt-out and the restriction on taking funds out of such schemes are lifted. With those reassurances, I hope the hon. Gentleman will agree to withdraw the amendment.

Andrew Selous: I note what the Minister has said about other possible consequences of amendment No. 158. As my hon. Friend the Member for Eastbourne said—and as he often says to the Committee—we do not have all the clever people that the Minister has working behind the scenes, so he may well be right that there are perhaps other consequences. In the light of that and the commitment that he has given to the Committee to consider what he described as the real issues that relate to stakeholders in 2017, and the fact that he said that he would be mindful of those issues in any proposed solution, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Andrew Selous: I beg to move amendment No. 182, in clause 68, page 32, line 24, leave out ‘regular intervals’ and insert ‘intervals of less than one year’.
This is a probing amendment: I want to find out exactly what is meant by the phrase “regular intervals”, which is used twice in subsection (4). It just struck me that it might be possible for unscrupulous employers to try to keep their employees in a stakeholder scheme by saying: “Don’t worry, contributions are being made at regular intervals”, when that interval is every decade or every fifteen years. A regular interval might not be often, but it could be as regular as every week, every month or every year. It is probably unlikely that anyone would seek to do that, but there are employers of all different types and characteristics and “regular” is a vague word, so I would like a decision to be taken on it and look forward to what the Minister has to say.

Danny Alexander: It is a pleasure to be here in Committee again today; I apologise for being slightly late. I would like to pass on my good wishes to the Minister for Pensions Reform and welcome the hon. Member for Rochford and Southend, East to the Committee. He has been here for only a short period, but I am none the less grateful that the Committee’s deliberations are attracting new interest even as we reach the latter stages of the Bill.
This is a very simple probing amendment, but it makes an important point, because the phrase “regular intervals” is obviously open to interpretation. It is clearly right to ask the Minister to clarify the position to ensure that employees cannot reschedule payments to very long intervals to avoid the obligation to make auto-enrolled contributions or for employers to ask them to do so. The one-year interval suggested in the amendment seems a sensible limit—it would certainly be hard to describe making a contribution less than once a year as regular—so I look forward to the Minister’s clarification.

James Plaskitt: I am grateful to hon. Gentlemen for speaking to the amendment, because it gives me the opportunity to provide the clarification that they seek, and it is important that I do so. But there is a very good reason why that word is used, and I will try to explain it. Clause 68 will amend section 3 of the Welfare Reform and Pensions Act 1999 to end the current stakeholder pension employer designation requirements when the new personal account provisions take effect. All the existing employer designation requirements will cease, except one transitional provision that relates to the payroll deduction facility.
Employees have bought their stakeholder pensions on the understanding that they can benefit from that payroll deduction facility. Employees who are paying into their stakeholder pensions via the their employers’ payroll when these reforms take place will continue to be able to benefit from that arrangement. It is right that they should continue to be able to make such payments for as long as they are employed by their employers or until they stop making contributions via the payroll.
The amendment would change the criterion that sets out when an employee is no longer able to benefit from the transitional provision. Instead of the provision ending when the employee stopped making regular contributions, it would happen when the employee stopped making contributions at intervals of less than one year. The explanatory note to the amendment states that its purpose is to “prevent employees from rescheduling”—[Interruption.]If the hon. Member for South-West Bedfordshire wants to intervene, that is fine—otherwise, I am just getting barracked.

Andrew Selous: I am not quite sure at what point the Minister’s note was written for him. There was a mistake in the explanatory note, which has now been corrected, so the version before us says “employer,” not “employee.”

James Plaskitt: I see the point that the hon. Gentleman is making, but I am quoting his explanatory note, which states:
“to prevent employers from rescheduling payments to very long intervals to avoid the requirement to make auto enrolled personal account contributions.”
Just for clarity, he is talking about the potential for an unscrupulous employer to go for very long payment intervals. I entirely understand; I have not misunderstood him.
There should be no easy way out for employers who do not wish to fulfil their duties under this legislation, and I want to make clear that stakeholder pensions are not one of those routes. An employer who wishes to continue to run a stakeholder scheme must ensure that it is a qualifying scheme that meets the policy requirements set out in the Bill, which may require an increase in their contributions to the scheme. If the scheme does not qualify, the employer must provide an alternative arrangement that does and enrol the eligible job holder into that scheme.
If a job holder does not wish to participate in pension savings, they do not have to. That is as true for personal accounts as it is for stakeholders. Once enrolled, the job holder can opt out of the scheme and will receive a refund if any payroll deductions have been made during the opted-out period. So the only way that a job holder could avoid being automatically enrolled is if they were already a member of a qualifying scheme. If the job holder were a member of a stakeholder scheme that met the quality requirements, he or she would not be automatically enrolled. If the job holder then wanted to reschedule their payments, their employer might permit that as long as the total employer and job holder contributions made were equivalent to 8 per cent. of the job holder’s qualifying earnings over the pay reference period.

Danny Alexander: I understand what the Minister is saying. The 3 per cent. figure applies whatever the period of time, so if an employer has to pay their 3 per cent. for a whole year at once, that is the same as paying 12 monthly payments throughout the year. However, what he says raises a further concern in that another option could be open to unscrupulous employers, of whom we know there are very few, but there is a risk none the less. If an employee opts out of being automatically enrolled, they might have a stakeholder scheme into which the employer, if he chooses, could make a lesser contribution on a voluntary basis.

James Plaskitt: The test still applies in respect of any scheme—it must meet the qualifying criteria for auto-enrolment—so I am not sure that that problem exists. I want to reassure the hon. Gentleman about the unscrupulous employer. The interaction between the 8 per cent. total requirement and the pay reference period will prevent anyone from going through the loophole that the hon. Member for South-West Bedfordshire had in mind when moving the amendment.
In short, rescheduling payments in stakeholder schemes could not help a job holder to avoid being automatically enrolled or help employers evade their duties. The provisions in the Bill mean that employers will ensure eligible job holders are in a qualifying scheme receiving minimum contributions and that job holders remain in that scheme paying contributions unless they decide to opt out. So there is a belt-and-braces provision within the legislation, but I appreciate his raising the issue, because it gives me a chance to clarify that and to reassure him sufficiently, I hope, to enable him to withdraw the amendment.

Andrew Selous: I am reassured by what the Minister has said about payments being made equivalent to 8 per cent. of qualifying earnings over the pay reference period. Put together, that is satisfactory. That was not clear to me in the Bill, but the Minister’s explanation has been helpful, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68 ordered to stand part of the Bill.

Clause 69

”Employee”, “worker” and related expressions

Andrew Selous: I beg to move amendment No. 185, in clause 69, page 33, line 20, leave out ‘whether oral or’.

Nicholas Winterton: With this it will be convenient to discuss amendment No. 186, in clause 69, page 33, line 29, leave out ‘whether it is oral or’.

Andrew Selous: Clause 69 is a veritable dictionary of definitions of different terms, which is very helpful. Words need to have precise meanings that we all understand when we are passing legislation, so it is certainly a helpful clause from that point of view. This is purely a probing amendment; note the word “probe” rather than “prove”, which may have been there originally, that comment is just to help the Minister in case he is working from an old brief. It is just to tease out exactly what an oral contract of employment might be, particularly one that is implied. In my naivety, I had thought that all contracts of employment would be in writing, express and quite clear, but that is clearly not the case; I have obviously led a more sheltered life than I had realised. It seems to conjure up all sorts of possibilities, so can the Minister paint in some of the detail on what types of contract of employment we are talking about being expressed or implied, particularly oral?

Danny Alexander: The amendment raises an important point. I appreciate the hon. Gentleman making the point that this is a probing amendment and it will be interesting to hear the Minister’s response. The reference to oral contracts in the Bill is important to retain. Particularly among the target group, who are working for low incomes perhaps in several different jobs who we have rightly worked on at various stages of the Bill, there are circumstances where some will be left out of the scheme because their are earnings are below the qualifying limit, which is a point that I made earlier in the Bill. They may not have what hon. Members on the Committee would regard as a written contract, which we would have with our staff—well, many Members would—or whatever, none the less, an oral contract would be regarded as a contract of employment. Certainly in Scots law there is strong protection for oral contracts and I know that that is what the Bill seeks to do. There are precedents for written contracts being required; the Employment Rights Act 1996 requires that the case of money being deducted from a salary must be in written contract. I can see the hon. Gentleman’s point in relation to central costs, but none the less it is important from the point of view of giving the maximum possibility for people in the target group to benefit from personal accounts that the provision that the amendment seeks in a probing nature to delete is retained in the Bill.

James Plaskitt: I was interested to hear the hon. Member for South-West Bedfordshire declare how possibly sheltered his life had been. It is a fact of the matter, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey pointed out, that there are a great many oral contracts in existence, certainly non-written formal employment contracts. As Members of Parliament we do not have formal written contracts, which is a point that we will come to later in the Bill and I am sure that we are all looking forward to that. As the hon. Member for South-West Bedfordshire says, clause 69 provides an array of definitions. I will take the opportunity now to respond to his specific points about oral contracts, while fully appreciating that the amendment is of a probing nature. A contract exists when it is written down or when an individual is told by someone offering work to start work on a given date for a set rate of pay, which in itself constitutes an oral contract. In an ideal world, of course, a contract would be written so that both parties were fully aware of the terms and conditions of employment, and the majority are.
However, we know that there are people without written contracts and we do not want to exclude them from the reforms. I know the hon. Gentleman does not want to do that either. The fact that someone may not have a piece of paper does not mean that he or she is not entitled to employment rights, and those extend beyond pension issues into other employment issues. The amendments would simply enable employers to avoid the duties established in the Bill by using an oral contract in place of a written contract. Obviously, that would not be right, because these reforms are about extending workplace pension saving with a minimum employer contribution to as many individuals as possible. The hon. Member for Inverness, Nairn, Badenoch and Strathspey is right to say that there are likely to be many in the target group with oral contracts.

Andrew Selous: It genuinely is a probing amendment, and that clarification is useful. I was interested in the hon. Gentleman’s definition of an oral contract as one where somebody was told to do some work at a particular point. Could the employer get out of having a contract by saying, “I would like my house cleaned, but I will leave the time up to you, as long as it gets done,” without giving a particular start date? Would that avoid an oral contract, by the Minister’s definition?

James Plaskitt: I am no expert on oral contracts, but I suspect not. As I understand it, once an engagement has taken place between employer and employee, a function has started, and payments are being made in respect of that activity, an oral contract has commenced. If that is incorrect, I will let the hon. Gentleman know, but that is my understanding at this point.

Danny Alexander: For clarification, there are many people in my constituency who work in the tourism industry. In some cases, what happens is that one applies for a job, interviews for the job, agrees to start the job on Monday, working four days a week at x rate of pay, and does so. Custom and practice means that what one has is therefore a contract of employment. Although it is not written down, that is a legally binding arrangement, to which all employment laws should apply.

James Plaskitt: I think we have reached broad agreement on what constitutes an oral contract, and I hope with that reassurance the hon. Gentleman will agree to withdraw the amendment.

Andrew Selous: Without further ado, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 69 ordered to stand part of the Bill.

Clause 70 ordered to stand part of the Bill.

Clause 71

Crown employment

Question proposed, That the clause stand part of the Bill.

Andrew Selous: I want to take the opportunity in the stand part debate to ask the Minister what estimates, if any, the Government have made about the cost to their own payroll of the provisions in the Bill. There is also the issue of local Government staff, who are obviously not in Crown employment, and that of bonuses to Crown employees, in which form considerable sums are paid from time to time, which we know will be subject to the 3 per cent. employer contribution.
It may be that I have missed it. I looked through the impact assessment quite carefully, to see if I could determine the Bill’s impact on the Exchequer as far as Crown employees are concerned. I appreciate that it is a few years off. I am not looking for detailed figures down to the last pounds and pence, but it would be useful to know that some of the clever people in the Treasury or elsewhere, to whom my hon. Friend the Member for Eastbourne often refers, are at least running their slide rules across the Bill’s implications for the public purse.

James Plaskitt: I would seek some clarification from the hon. Gentleman. He may wish to intervene on me again. There are two issues he may be getting at, and while I listened carefully to what he said, it was not quite clear which of those two issues it was. One would be the potential implication if he sees the clause resulting somehow in additional auto-enrolment into schemes. I am not sure if he does mean that, because all of the existing public sector schemes will satisfy the qualifying criteria, or whether he means the cost to the exchequer of revisions to public sector pension as a result of the reforms that have taken place. If he wants to intervene I might be able to be more assistance to him.

Andrew Selous: It was kind of the Minister to seek further clarification. He has in part answered my query. If he has just said that all Crown employees are already fully covered, I think that does go some way to answering my question. There is the question of bonuses. One reads quite regularly of high flying members of the public service being given large bonuses. The Child Support Agency senior staff were given bonuses quite recently, just to quote one example.
In an earlier provision we put into law that bonuses commissions will be part of the contribution that makes up personal accounts. It may be that this is already covered because public sector pensions for Crown employees are so wonderful anyway that it does not apply. I thought it would be remiss to go through clause 71 without at least probing the Minister and asking for some clarification.

James Plaskitt: I am a little clearer as to the direction he is seeking to take. I think he will be aware that there is a great deal of public sector pension reform taking place. He will know that there are new schemes for teachers that have been in operation since January of last year, and a new scheme for civil servants, which he referred to, which was introduced in July of last year. From April this year a new scheme for the NHS comes into effect and in due course there will be a new scheme for local government workers as well. He will know that the thrust of all these reforms is to ensure affordability to the public purse of all of these schemes. He will have seen the long-term public finance report that the Government published in December 2006, which confirms that expenditure on public service pension provision across the board remains sustainable over the next 50-year period. That includes and anticipates the impact of bonus payments, for example.
The Government’s assessment of the cost of these schemes and their sustainability over the foreseeable future has therefore been clearly assessed, with actuarial evidence behind it. I hope he will accept this.

Andrew Selous: Just to be absolutely clear, is the Minister is saying that pensions for Crown employees are so good that they are well above the levels of contribution of the personal accounts scheme? If so, the personal accounts scheme will not apply at all to Crown employees within the salary bands we are talking about.

James Plaskitt: My understanding of the great bulk of the schemes that are currently in existence in the public sector is that they would not have a difficulty meeting the qualifying criteria, though I do not have the opportunity to go over every single conceivable little corner of the public sector to be sure about that. I have looked at the terms of all of the existing ones in which most people are enrolled and they satisfy the criteria. Now he has come back to the first of the two things he raised, I do not think the financial impact of this clause will be at all significant.

Danny Alexander: The Minister is right in that respect, given that the implied employer contribution for High Court judges is 31 per cent., for Members of Parliament it is about 25 per cent. and for senior civil servants it is also in the low 20 per cent. region. Is he worried that the advent of personal accounts is likely to lead to levelling-down for these levels of contribution?

James Plaskitt: We have had a very lengthy discussion about levelling-down already. As the hon. Member knows, there are clear criteria that the Government seeks to apply to the public sector pension provision, one of which, most importantly, is affordability.
Any changes that are to be made to employer or employee contributions within the schemes will be made in the light of those criteria. For example, the cost-sharing and capping arrangements that have been introduced may in future have an effect on the employer or employee contributions. The governing criteria are the long-term sustainability of the schemes and the fact that they give decent value to the taxpayer. The effect of the proposal will not be a significant driver of any of those changes, although such changes may take place, but I think it will be for other reasons.

Danny Alexander: The Minister is right to make the point about affordability. Presumably, he is unworried by the recent conclusion of an independent body—the Institute for Fiscal Studies—that unfunded liabilities in the public sector pension arrangements at present amount to about £700 billion.

James Plaskitt: As I suspect the hon. Gentleman knows, that assessment depends on the basis on which it is calculated—a variety of numbers can be used. Indeed, I have seen some figures that suggest that the unfunded liability is even larger than the figure he cited. He must carefully consider the assumptions that have been made in calculating the figures, from which he will see that the higher numbers, including the figure he gave, are not assessed simply on the basis of pension payable to known individuals who will receive them.
The larger figures take into account all those who are currently in employment who are potentially building pension pots and assume that they will always be in employment and in the public sector, therefore all their pot will be in the public sector. But one cannot make such an assumption, because employees may not stay in the public sector. The kind of assessment to which the hon. Gentleman refers on future unfunded liability could have been made at any stage at any time in the past in respect of public sector pension liability. It would always have produced a large number if it had been calculated on the criteria that he cited and always have looked scary but we have never hit a point when it has become unfundable, unsustainable or overly burdensome.
I caution the hon. Gentleman on waving the big numbers around. He should first check on the assumptions that lie behind them and bear in mind that historically it has always been possible to carry out such an exercise. It does not mean as much as some of those who wave the numbers around imply. The key test is whether the schemes are sustainable over the long-term period of 50 years or so. The hon. Gentleman has the Government’s published information on that, and it has actuarial support behind it. I hope he will therefore support clause stand part.

Clause 71 ordered to stand part of the Bill.

Clause 72

House of Lords staff

Andrew Selous: I beg to move amendment No. 183, in clause 72, page 34, line 41, at end add
‘or a Member of the House of Lords.’.

Nicholas Winterton: With this it will be convenient to discuss amendment
No. 184, in clause 73, page 35, line 7, at end insert—
‘(c) who is employed by a Member of Parliament.’.

Andrew Selous: Amendment No. 184 also relates to clause 73, so I hope you will not rule me out of order, Sir Nicholas, if I touch on the provisions of that clause. For the record, the explanatory note should say “probe” rather than “prove”. I entirely blame my handwriting for that mistake. The fault is all mine, not the excellent staff who assist Opposition Members in tabling amendments.
I refer to both clauses; I understand the distinction between people who work for the House authorities—some are in this room—and staff who are employed by Members of Parliament, but I want to know the position of Members’ staff. We are all small employers in our own right as Members of Parliament. There are some good aspects to that, in that we are not isolated from some of the matters that hundreds of thousands of small employers have to deal with up and down the country.
I am not arguing that we should be isolated from that or financially insulated from the provisions of this Bill. I am interested to know what the effect would be on staff employed by Members of the House of Lords and Members of the House of Commons. My amendment by implication does come to finance as well. If we are going to have take it on the chin, it will have financial implications for salary levels. I am not sure whether the Treasury would be minded to increase the grant to the House of Commons Commission so that the employer contribution could be paid.
I am not expecting the Minister to have a full answer at his fingertips but it would be useful if he could say something.

Danny Alexander: I appreciate that these are probing amendments but they are probing at a point that all Members of the Committee and those who work for us would regard as interesting and significant so I am grateful to the hon. Member for South-West Bedfordshire for introducing the argument.
As Members know, staff of MPs as opposed to staff of the House have the opportunity to take part in the Portcullis pension plan. I assume, though I would be grateful for the Minister’s clarification, that the auto-enrolment provisions in the Bill would apply equally to that scheme, or relevant improvements would be made to ensure that it qualified. It is important to ensure that the benefits of automatic enrolment do apply to the two groups of people highlighted by these amendments. I look forward to the Minister’s agreement with that point.

James Plaskitt: The House of Lords and the House of Commons employ permanent fixed-term casual and freelance workers who are all employed under a worker’s contract. Clause 72 confirms that those people who work under a contract for the corporate officer of the House of Lords are workers for the purposes of these reforms. Similarly, clause 73 confirms that those people who are appointed by the House of Commons Commission or members of the Speaker’s personal staff are workers for the purposes of these reforms.
The corporate office of the House of Lords and the House of Commons Commission respectively are bound by the employer duty automatically to enrol these job-holders into a qualifying workplace pension scheme. We must not confuse these workers with those who are directly employed by peers of Members of Parliament.
The key point is that the provisions of this Bill already cover those people already employed by peers and Members of Parliament. Anyone directly employed by a peer or Member of Parliament that has job-holder status—that is, a worker between the age of 16 and 75 with qualifying earnings—would be entitled to participate in workplace pension saving with the minimum contribution from their employer.
A peer or Member of Parliament with such a job-holder would need to engage with a suitable scheme into which to enrol job-holders. A peer or Member of Parliament who employs a job-holder between the narrower band of age 22 to state pension age would have automatically to enrol that job-holder.
I hope that provides clarification and that the hon. Member will feel able to withdraw his amendment.

Andrew Selous: Yes, I am grateful for that clarification from the Minister. It was a probing amendment as I stated at the beginning. I beg leave to ask to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 ordered to stand part of the Bill.

It being twenty-five minutes past ten o’clock The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.